One of the most difficult tasks of the Realtor in Delaware County taking a new listing is convincing the seller to price their home moderately in this difficult market. I don't know how many times we have heard
" Our home is much nicer than our neighbors that is on the market so we want $10,000 more".
The biggest mistake sellers make is trying to price their home on what all the other homes on the market are trying to get instead of focusing on the homes that actually went to settlement in the last six months. That tells the story of what the homes are actually worth to the public. They need to take the actual settlement price and add say 10% to allow for the buyer dropping down off the asking price. Most buyers in this market do not offer asking price unless either it was priced below market value for a quick sale or it is absolutely perfect and they are in a multiple bid situation. Another item on the settlement sheet that sellers have trouble dealing with is in some areas buyers are getting a seller's assist to help with the settlement costs. It might be as high as 6% of the contract price. That only shows up on the Realtors sites and the public is not aware of it. So they might see a settlement price of $200,000 but missed the small notation there was a $12,000 concession meaning the buyer got that to help with settlement cost.
Here is a situation that we ran into last week. We took one of our clients to see a home that was priced low in Havertown, Delaware County. It was a single home that needed everything. The asking price was around $20,000 lower than the average for a fixer upper. It was an estate sale so the family wanted it sold quickly. When we went to our appointment to see the home there was a crowd of 6 people waiting to get in the home for a scheduled open house that the listing realtor never showed up for. We showed the home to our client and then let the people in for a quick look. While they were looking four more people showed up to see it. We finally got them all out of the home and continued on our showing schedule. Our client expressed interest in the home. Another agent in our office saw our car there and said he took a client through also and when he called the listing agent she said she already had 8 offers. Another agent in our office also had a client put an offer in and his client's offer was accepted above the asking price close to the normal price for that typed of home. So in this scenario it worked for the seller. The home was on the market only 14 days and they got close to the average settlement price. If they had put it up for say $20,000 above the normal price it probably would have sat on the market much longer and the offer price would still have been down in the average settlement price.
So let me repeat, Pricing correctly is Everything in this market in Havertown, Delaware County
Thursday, July 16, 2009
Wednesday, July 15, 2009
The Market Two Years Later
I published the initial blog about Havertown in Delaware County in March 2007 and find it interesting looking at it today. The causes of the bubble and collapse of the Real Estate Markethave been verified by multiple sources over time and I would like to comment on today's market.
The downturn continues. Homes are on the market longer than ever and the number of listings that expire (the listing contract expires without an acceptable offer, usually 6 months) and withdrawns ( the seller gets disgusted and just pulls the home off the market because no offers are coming in) are up 200%. Prices have dropped about 15% in this area. There is over 18 months supply of inventory sitting on the market because the number of buyers has shrunken dramatically. Interest rates are low but only the top qualified buyers can get a mortgage so the first time buyers that drive the market are shut out. Without first time buyers purchasing there is no trading up. e.g. Owner 1wants to move out of their starter home to a mid sized home. They cannot sell their existing home. That means the mid sized home they were going to buy goes unsold. That means the mid sized home owner cannot move up to the bigger home they want. So you see the first time buyer controls the market and no one can move up.
In Delaware County lenders want a minimum of 10% down and some want 20% for a conventional mortgage. So a first time buyer on a $150,000 home needs either $15 or $30k down plus another 5% of the asking price to cover closing cost. They must also have excellent credit. Now realistically how many young people do you know that have that kind of cash reserves on hand? That is the problem in a nutshell. The alternative is FHA financing which is now doing about 70% of the market, up from 20% 2 years ago. They only require around 3.5% down but you still need excellent credit and closing cost. Even going FHA you are looking at around $13,000 cash on hand which still limits the buyer pool.
The market will take years to recover because it will take the first time buyers years to save that kind of cash. We do not save much as a society and our basic premise of buying a home has to change. There are no free rides on homes anymore and 100% financing is dead. I welcome all responses to this article. Thank You
The downturn continues. Homes are on the market longer than ever and the number of listings that expire (the listing contract expires without an acceptable offer, usually 6 months) and withdrawns ( the seller gets disgusted and just pulls the home off the market because no offers are coming in) are up 200%. Prices have dropped about 15% in this area. There is over 18 months supply of inventory sitting on the market because the number of buyers has shrunken dramatically. Interest rates are low but only the top qualified buyers can get a mortgage so the first time buyers that drive the market are shut out. Without first time buyers purchasing there is no trading up. e.g. Owner 1wants to move out of their starter home to a mid sized home. They cannot sell their existing home. That means the mid sized home they were going to buy goes unsold. That means the mid sized home owner cannot move up to the bigger home they want. So you see the first time buyer controls the market and no one can move up.
In Delaware County lenders want a minimum of 10% down and some want 20% for a conventional mortgage. So a first time buyer on a $150,000 home needs either $15 or $30k down plus another 5% of the asking price to cover closing cost. They must also have excellent credit. Now realistically how many young people do you know that have that kind of cash reserves on hand? That is the problem in a nutshell. The alternative is FHA financing which is now doing about 70% of the market, up from 20% 2 years ago. They only require around 3.5% down but you still need excellent credit and closing cost. Even going FHA you are looking at around $13,000 cash on hand which still limits the buyer pool.
The market will take years to recover because it will take the first time buyers years to save that kind of cash. We do not save much as a society and our basic premise of buying a home has to change. There are no free rides on homes anymore and 100% financing is dead. I welcome all responses to this article. Thank You
What Has Caused This Real Estate Market Slowdown In Delaware County
Why Home Prices Went Up And The current Slow Market In Havertown
There are many answers all combining to put the real estate market in a tailspin In Havertown. In our particular area (Delaware County, Pa a suburb 20 minutes from Philadelphia) the market slowed down in the fall of 2006. It has not recovered yet and every realtor in our Century 21 Alliance office is crossing their fingers and repeating the mantra " things will pick up in the spring" lol. Here are mine and my wife's observations (we work as a team out of our office.) http://www.bradyhometeam/ is our website. The home prices in our area skyrockted like the rest of the country the last five years for several reasons.1.Everyone was caught up in the "I have to have a bigger and better home" or first time buyers wanting to own instead of rent syndrome. This increased the number of buyers and the supply and demand theory kicked in driving up prices across the board. Existing homes were unable to handle the volume of buyers so developers rushed into the breech building new construction homes with all the amenities clients could possibly want. This in turn created a shortage of building materials that drove their prices up and was passed on the the buyers. Most new construction contracts have a clause in them stating that the price may go up before construction is complete.2. Investors on Wall Street poured money into treasury bonds and mutual funds that invest in real estate mortgages increasing the pool of money available. Since the number of buyers increased the banks and mortgage companies saw a potential for profit and increased their media drive to supply mortgages at some of the lowest interest rates in years. The old rules for lending went out the window in their rush to be competitive and first time buyers and returning clients with less than steller credit were accepted with all kinds of new mortgages including 100% financing, teaser rates on adjustable mortgages, interest only loans and a whole variety of packages that just seemed to good to turn down.3.When we go out on a listing presentation to sign up a seller and suggest a price to the seller their expectations are sometimes unrealistic and they would like to see a price $5000 higher than the last home on their street because they believe their home is much nicer than their neighbors or they have made personal choices on improvements that they would like to pass on to the buyers. Even after presenting them with the hard facts on paper it dosen't change their mind and sadly if you want a chance at getting that home on the market the agent has to cave in knowing it is priced too high. If the agent holds the line on the suggested price he loses the contract because the next agent coming in is going to say "how much? I can get you more than that!" It is a nasty cycle that feeds on itself. The odd thing is that the last five years 75% of the time the buyers actually paid the higher price because they were caught up in the frenzy of owning a home and multiple bids were common on the nicer homes. On a multiple bid situation there is alway a low bid, an asking price bid, one a little higher and one that just seems to blow everyone else out of the water. The seller naturally wants the highest bid taken and that feeds into the cycle also driving the price up.The Real Estate Slowdown - Cause & EffectNow to the slowdown covering the causes, effects and possible future.1. Inflated prices on homes occuring over the last 5 years from an influx of buyers has slowed and coupled with the traditional slow winter sales period in the Havertown, Delaware County , Chester, Montgomery, & Bucks county areas of real estate has everyones attention in the business wondering why it has not picked up this spring as it has in the past. Since all of the media attention has been focused on a housing bubble and when, not if it will break, both sellers and buyers are hesitant to jump in. Sellers fear they will not get top dollar so hesitate on putting their homes on the market. Buyers are fearfull they will buy in at the top end and see their investment shrink.2. With the recent Sub-Prime Mortgage Lender Fiasco the mortgage companies investors have dried up and their stock has plummeted so they cannot take on new loans of risky clients. Clients that took adjustable loans with a low teaser rate are ready to refinance but may run into problems with it if their credit is not steller. That means foreclosures are up across the country driving prices down since the mortgage lender is looking for a quick sale and will undercut market prices to get it done. First time buyers with shaky credit will not be able to get all of the financing they would like so might be shut out of the market. This shrinks the available buyer pool in some areas making it harder to sell homes on the market. These first time buyers will need to put down the traditional 10% and one client told us his lender wants 20% down to get a good rate on their mortgage. This will shock the first time buyers as they are used to the media coverage of 100% financing, low rates, etc., they see commonly advertised. They may have to stay in the rental market longer since most buyers want a low mortgage rate regardless of their credit and refuse to take on a note with high interest. We have had clients in the past who wanted to buy and had a mortgage pre-approval for 100% financing and a gift letter from family members covering the settlement charges. This practice will continue in the mid and high range markets because most buyers in that market have better credit or higher income but the more moderately priced homes will be affected and mortgage companies might not allow this practice in that market. So some estimates have the buyer pool being reduced by as much as 20% that will add to the problem. The National Association Of Realtors on the other hand reports February Existing Home Sales are the strongest since last April which I find hard to believe. In our real estate office in Havertown Pa. it sure dosen't look like it.3.Talking with realtors they all seem to agree the market is in a slowdown. Agents who were doing only listings the last few years and not getting involved with buyers because it takes a lot more work to find a buyer a home than to list a home and let the other realtors bring the buyers to you are now going out looking for buyers because the listings are down dramatically. This in turn will hurt the less established realtors and force some to leave the business if it is a prolonged downturn adding to economy woes as the workforce has to adjust to other means of income. Any prolonged slump in housing will trickle down to building materials, tradesman, construction, home supply centers, retailers etc. and add to the uneasiness of the economy and this will steamroll with dire results. Housing has been one of the stalwarts of the economy the last five years and has driven the markets to new highs. Some economists predict a recession if all of the above things happen. March 27. 2007 the markets dropped 70 points and one of the reason was a weak housing report. The nations largest new home builder reported profits down 73% in the last quarter of 2006 as opposed to a year ago.This is a work in progress and I will add content as I can and welcome all exchanges of information on real estate
There are many answers all combining to put the real estate market in a tailspin In Havertown. In our particular area (Delaware County, Pa a suburb 20 minutes from Philadelphia) the market slowed down in the fall of 2006. It has not recovered yet and every realtor in our Century 21 Alliance office is crossing their fingers and repeating the mantra " things will pick up in the spring" lol. Here are mine and my wife's observations (we work as a team out of our office.) http://www.bradyhometeam/ is our website. The home prices in our area skyrockted like the rest of the country the last five years for several reasons.1.Everyone was caught up in the "I have to have a bigger and better home" or first time buyers wanting to own instead of rent syndrome. This increased the number of buyers and the supply and demand theory kicked in driving up prices across the board. Existing homes were unable to handle the volume of buyers so developers rushed into the breech building new construction homes with all the amenities clients could possibly want. This in turn created a shortage of building materials that drove their prices up and was passed on the the buyers. Most new construction contracts have a clause in them stating that the price may go up before construction is complete.2. Investors on Wall Street poured money into treasury bonds and mutual funds that invest in real estate mortgages increasing the pool of money available. Since the number of buyers increased the banks and mortgage companies saw a potential for profit and increased their media drive to supply mortgages at some of the lowest interest rates in years. The old rules for lending went out the window in their rush to be competitive and first time buyers and returning clients with less than steller credit were accepted with all kinds of new mortgages including 100% financing, teaser rates on adjustable mortgages, interest only loans and a whole variety of packages that just seemed to good to turn down.3.When we go out on a listing presentation to sign up a seller and suggest a price to the seller their expectations are sometimes unrealistic and they would like to see a price $5000 higher than the last home on their street because they believe their home is much nicer than their neighbors or they have made personal choices on improvements that they would like to pass on to the buyers. Even after presenting them with the hard facts on paper it dosen't change their mind and sadly if you want a chance at getting that home on the market the agent has to cave in knowing it is priced too high. If the agent holds the line on the suggested price he loses the contract because the next agent coming in is going to say "how much? I can get you more than that!" It is a nasty cycle that feeds on itself. The odd thing is that the last five years 75% of the time the buyers actually paid the higher price because they were caught up in the frenzy of owning a home and multiple bids were common on the nicer homes. On a multiple bid situation there is alway a low bid, an asking price bid, one a little higher and one that just seems to blow everyone else out of the water. The seller naturally wants the highest bid taken and that feeds into the cycle also driving the price up.The Real Estate Slowdown - Cause & EffectNow to the slowdown covering the causes, effects and possible future.1. Inflated prices on homes occuring over the last 5 years from an influx of buyers has slowed and coupled with the traditional slow winter sales period in the Havertown, Delaware County , Chester, Montgomery, & Bucks county areas of real estate has everyones attention in the business wondering why it has not picked up this spring as it has in the past. Since all of the media attention has been focused on a housing bubble and when, not if it will break, both sellers and buyers are hesitant to jump in. Sellers fear they will not get top dollar so hesitate on putting their homes on the market. Buyers are fearfull they will buy in at the top end and see their investment shrink.2. With the recent Sub-Prime Mortgage Lender Fiasco the mortgage companies investors have dried up and their stock has plummeted so they cannot take on new loans of risky clients. Clients that took adjustable loans with a low teaser rate are ready to refinance but may run into problems with it if their credit is not steller. That means foreclosures are up across the country driving prices down since the mortgage lender is looking for a quick sale and will undercut market prices to get it done. First time buyers with shaky credit will not be able to get all of the financing they would like so might be shut out of the market. This shrinks the available buyer pool in some areas making it harder to sell homes on the market. These first time buyers will need to put down the traditional 10% and one client told us his lender wants 20% down to get a good rate on their mortgage. This will shock the first time buyers as they are used to the media coverage of 100% financing, low rates, etc., they see commonly advertised. They may have to stay in the rental market longer since most buyers want a low mortgage rate regardless of their credit and refuse to take on a note with high interest. We have had clients in the past who wanted to buy and had a mortgage pre-approval for 100% financing and a gift letter from family members covering the settlement charges. This practice will continue in the mid and high range markets because most buyers in that market have better credit or higher income but the more moderately priced homes will be affected and mortgage companies might not allow this practice in that market. So some estimates have the buyer pool being reduced by as much as 20% that will add to the problem. The National Association Of Realtors on the other hand reports February Existing Home Sales are the strongest since last April which I find hard to believe. In our real estate office in Havertown Pa. it sure dosen't look like it.3.Talking with realtors they all seem to agree the market is in a slowdown. Agents who were doing only listings the last few years and not getting involved with buyers because it takes a lot more work to find a buyer a home than to list a home and let the other realtors bring the buyers to you are now going out looking for buyers because the listings are down dramatically. This in turn will hurt the less established realtors and force some to leave the business if it is a prolonged downturn adding to economy woes as the workforce has to adjust to other means of income. Any prolonged slump in housing will trickle down to building materials, tradesman, construction, home supply centers, retailers etc. and add to the uneasiness of the economy and this will steamroll with dire results. Housing has been one of the stalwarts of the economy the last five years and has driven the markets to new highs. Some economists predict a recession if all of the above things happen. March 27. 2007 the markets dropped 70 points and one of the reason was a weak housing report. The nations largest new home builder reported profits down 73% in the last quarter of 2006 as opposed to a year ago.This is a work in progress and I will add content as I can and welcome all exchanges of information on real estate
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